Retail set for tough year in 2016

Deloitte expects retail sales to remain solid next financial year before dropping off the year after.

AAP: Tracey Nearmy, file photo

A prominent economic forecaster is tipping the federal budget will not make a significant dent in retail sales for more than a year.

There have been worries the budget will cause households to stop spending, dragging on economic growth.

The latest forecasts from Deloitte Access Economics forecast sales growth to accelerate to a solid 3.6 per cent next financial year.

It is then set to slow to just under 2.5 per cent in 2016 as the budget starts to bite.

Deloitte partner David Rumbens says, while turnover probably dropped last month at the time of the budget, that may just be a temporary decline.

"How long that lasts remains to be seen. We know that the confidence measures have softened but actual sales don't always follow those confidence measures," he observed.

"If you look at the actual impact of the budget on ability to spend, yes, there will be a degree of a hit in the coming year, but the bigger impact actually happens a further year on."

Mr Rumbens says the Reserve Bank may feel the need to soften the blow.

"It's possibly worried about the effect of the budget on overall spending and may seek to counteract some of that by keeping interest rates lower for longer," he said.

The report finds New South Wales has the strongest growth, while sales are now going backwards in Western Australia and the ACT.

Mr Rumbens says the booming housing market is supporting the retail sector in New South Wales.

"Over the past year NSW has really been the strongest jurisdiction for retail," he said.

"After many years of being towards the middle and lower end of the pack it's had a very strong year and that is very much linked to those low interest rates and improving house prices encouraging people to spend.

"It also reflects that jobs growth has been pretty reasonable in NSW over the first few months of the year."

Another profit downgrade

Retailers will certainly be hoping for a pick up in sales in the new financial year.

Another Australian retailer has blamed the federal budget and unseasonably warm weather for cutting its profit forecasts.

Super Retail Group, which owns chains like Rebel Sport, Supercheap Auto and Ray's Outdoors, now expects full-year profit to rise by around 5 per cent on the year before, to between $107 and $109 million.

It says sales have been lower than anticipated over the last six weeks as the post-budget fall in consumer confidence affects lower to middle income earners.

Super Retail expects sales to remain subdued for the rest of the financial year.